In the matter of Coca-Cola Amatil Limited [2021] NSWSC 489

In the matter of Coca-Cola Amatil Limited [2021] NSWSC 489 | Case summary | Zoe

[2]

Background and affidavit evidence

On 12 March 2021, I made orders convening a meeting to consider a scheme of arrangement in respect of Coca-Cola Amatil Limited ("Amatil"). Amatil now seeks an order under s 411(4)(b) of the Corporations Act 2001 (Cth) approving a scheme of arrangement between it and Independent Amatil Shareholders (as defined), being those shareholders other than certain Excluded Shareholders (as defined). The Excluded Shareholders are Coca European Partners plc ("CCEP") and its subsidiaries and Coca-Cola Company and its subsidiaries, and any Amatil shareholder who holds shares in behalf of either of them.
Amatil relies on the affidavit dated 18 April 2021 of their solicitor, Mr Damian, which refers to several non-material amendments to the scheme booklet made after the first Court hearing on 12 March 2021, to the registration of the Scheme Booklet by the Australian Securities and Investments Commission ("ASIC"), the advertisement of the Court hearing, and the absence of any notice of an Amatil shareholder seeking to oppose the scheme at the second Court hearing. I should add that no shareholder appeared to oppose the scheme at that hearing. Mr Damian also confirms that the only Excluded Shareholder for the purposes of the scheme is Coca-Cola Holdings (Overseas) Limited and the orders made by the Court have reflected that position.
Amatil also relies on the affidavit dated 17 April 2021 of Ms Atlas, who is a non-executive director and its chair, which refers to questions submitted by Independent Amatil Shareholders in respect of the scheme meeting, the answers which were given to those question, and the conduct of the scheme meeting. Ms Atlas also refers to the results of the poll in respect of the scheme resolution, such that 81.55% of Independent Amatil Shareholders by number and 99.03% of Independent Amatil Shareholders by votes supported the scheme resolution, which was therefore passed by the requisite statutory majorities.
Amatil relies on the affidavit dated 18 April 2021 of Ms Chiu, who is a client relationship manager with Link Market Services Ltd ("LMS"), which provides share registry services and meeting management services, and was retained by Amatil to provide services in relation to the administration of the scheme. Ms Chiu refers to the maintenance of Amatil's register of members, the dispatch of scheme materials, including the persons to whom those materials were made available in electronic form, and the dispatch of materials to new Independent Amatil Shareholders whose names were recorded in the register during the relevant period, and the receipt of proxies in respect of the scheme meeting. Ms Chiu also addresses the process of registration of attendees at the scheme meeting and confirms that Coca-Cola Holdings (Overseas) Limited did not vote at that meeting. She refers to the votes cast at that meeting, and to a results report prepared by LMS, which is consistent with Ms Atlas' evidence as to voting at the meeting. She also notes that voting participation rates for the meeting were broadly comparable with the voting participation rates at Amatil's AGMs between 2018 and 2021, with a relatively small percentage of shareholders having voted, and the percentage of shares voted having ranged between about 52% and about 72%.
Amatil also tendered a letter dated 19 April 2021 from ASIC which advised, under s 411(17)(b) of the Corporations Act, that ASIC had no objection to the proposed scheme, and tendered conditions precedent certificates executed by Amatil, CCEP and CCEP Australia Pty Ltd which confirmed the satisfaction of conditions precedent to the scheme, other than the condition relating to Court approval of the scheme.

[3]

The applicable principles

Section 411(4) of the Corporations Act has the effect that an arrangement is binding on Amatil and, relevantly, Independent Amatil Shareholders if, at a meeting of Independent Amatil Shareholders, it is passed by a majority of scheme shareholders present and voting (in person or by proxy) and by 75% of votes cast and it is approved by order of the Court. Section 411(6) of the Act provides that the Court may grant approval subject to such alterations or conditions as it thinks just.
At the second Court hearing, the Court will first determine whether the procedural requirements in respect of the scheme have been satisfied and then exercise its discretion as to whether or not to approve the scheme: Re Central Pacific Minerals NL [2002] FCA 239 at [12]; Re Redcape Property Fund Ltd and Trust Company (RE Services) Ltd (as the responsible entity for the Redcape Property Trust) [2012] NSWSC 486 at [7]; Re Aveo Group Ltd [2019] NSWSC 1679 at [15]. The Court is not bound to approve a scheme merely because it has previously made orders for the convening of meetings and the statutory majorities have been achieved, and will have due regard to members' assessment of their interests as manifested in the voting at the scheme meeting, and will recognise that shareholders are generally "the best judges of whether an arrangement is to their commercial advantage", and will therefore "be reluctant to make decisions contrary to the views of security holders expressed at meetings": Re NRMA Ltd (No 2) (2000) 156 FLR 412; [2000] NSWSC 408 at [22]; Re Central Pacific Minerals NL above at [13]; Re Seven Network Ltd (2010) 77 ACSR 701; [2010] FCA 400; at [31]; Re Atlas Iron Ltd (No 2) [2016] FCA 481 at [5].
The Court will generally take several matters into account in the exercise of its discretion, while recognising they are not a closed list, including whether scheme members have voted in good faith and not for an improper purpose; whether the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone might approve it; whether the plaintiff has brought to the attention of the Court all matters that could be considered relevant to the exercise of the Court's discretion; whether there has been full and fair disclosure of all information material to the decision; whether minority shareholders would be oppressed by the scheme; whether the scheme offends public policy; and whether the interests of other groups who are not parties to, but are affected by, the scheme are dealt with appropriately: Corporations and Markets Advisory Committee report, Members' schemes of arrangement, 2009, pp 49-52; Re Permanent Trustee Co Limited (2002) 43 ACSR 601; [2002] NSWSC 1177 at [8]-[10]; Re Solution 6 Holdings Ltd (2004) 50 ACSR 113; [2004] FCA 1049 at [18]-[24]; Re Seven Network Limited above at [35]-[40]; Re Texon Petroleum Ltd (No 2) [2013] FCA 147 at [6]-[17]; Re David Jones Limited (No 3) [2014] FCA 753 ("David Jones") at [3]; Re GBST Holdings Ltd [2019] NSWSC 1503 ("GBST Holdings") at [11]; Aveo Group above at [15].
In Re Amcor Limited (No 2) [2019] FCA 842 at [7]-[11], Beach J summarised the applicable principles as follows: "In essence, my role at the second court hearing is to assess the Scheme taking into account whether the Scheme is sufficiently fair and reasonable such that an intelligent and honest shareholder properly informed and acting alone might approve it. Of course, I can only approve a scheme of arrangement if the requisite majority of shareholders vote in favour of it, but I am not bound to approve the Scheme simply because I previously made orders for the convening of a Scheme meeting and subsequently the requisite majority agreed to it. But I accept that shareholders voting collectively at the Scheme meeting are better judges than I of what is to their commercial advantage and in their interests and accordingly, absent good reason, I should give effect to their intentions. Now whilst there is no exhaustive statement of the matters as to which I must be satisfied before granting approval, it is not in doubt that in exercising my power under s 411(4)(b), I should be satisfied that: (a) the Scheme complies with the law, including the relevant procedural requirements; (b) The Scheme was approved by shareholders acting in good faith and for proper purposes; (c) There has been an accurate and comprehensive disclosure of the details of the Scheme and its effect to those voting on it; (d) there is no suggestion of oppression of any minority; (e) there is no evidence that any third parties will be disproportionately adversely affected by the operation of the Scheme; (f) the Scheme does not offend against any aspect of public policy; and (g) all matters that could be considered relevant to the exercise of my discretion have been drawn to my attention. I also need to be satisfied that the conditions precedent to the Scheme have been met, save for Court approval, and that ASIC has been given the opportunity to draw to my attention any relevant matter(s). In considering whether the Scheme complies with the law, including the relevant procedural requirements, I need to satisfy myself that the procedural and other requirements in the Act, Corporations Regulations 2001 (Cth) and [the Corporations Rules] have been complied with and that the requirements for a valid resolution of the shareholders have been satisfied. Now as I have said, my task is to consider whether the Scheme is fair and reasonable with the test of fairness and reasonableness including a consideration of whether "an intelligent and honest [shareholder], properly informed, acting alone, might approve [the scheme]" … But the Scheme shareholders' vote in favour of the Scheme is evidence of its inherent fairness. Put another way, if a majority of the Scheme shareholders have approved the Scheme, it is unlikely that the Scheme would be unreasonable. Further, I do not have to be satisfied that no better Scheme could have been devised."
I have drawn on my summary of the relevant principles in Re TPG Telecom Ltd [2020] NSWSC 978 at [7]ff for the summary that appears above.

[4]

Determination

Mr Jackman, who appears for Amatil, points out that the scheme booklet dispatched to the Independent Amatil Shareholders on 15 March 2021 was substantially in the form of the document approved by the Court for dispatch and successive drafts of that booklet have been made available to ASIC for review. I have referred above to Ms Chiu's evidence as to the steps taken in relation to the dispatch of the scheme booklet and proxy forms to the Independent Amatil Shareholders and to Ms Atlas' and Ms Chiu's evidence as to the conduct of the scheme meeting and the online voting process at that meeting and the result of that meeting.
In accordance with an undertaking provided by Amatil at the first Court hearing, and noted in order 16 of the orders made on 12 March 2021, a trust account was set up with the Commonwealth Bank of Australia which was an "authorised deposit-taking institution" within the meaning of the Banking Act 1959 (Cth) to hold the scheme consideration before it was paid top Independent Amatil Shareholders. Implementation of the scheme was conditional on a number of conditions precedent being satisfied or waived and, as I noted above, Amatil has tendered certificates stating that all of the relevant conditions precedent have been satisfied or waived, other than the condition relating to Court approval of the scheme. ASIC has also confirmed that it has no objection to the scheme and provided a letter to that effect under s 411(17)(b) of the Act, and that letter is sufficient to satisfy the requirements of s 411(17). There is evidence that Amatil has published a notice of the Court hearing for approval of the scheme in a national newspaper.
There is no reason to doubt that the substantial number and majority of scheme members who voted in favour of the scheme did so in good faith and for a proper purpose, and no reason to doubt that the proposal is fair and reasonable so that an intelligent and honest person who was a member of the relevant class, properly informed and acting alone might approve it. The independent expert concluded (and continues to conclude) that the scheme is fair and reasonable, and is therefore in the best interests of the Independent Amatil Shareholders, in the absence of a superior proposal. There is also no reason to doubt that Amatil has brought to the Court's attention the matters that could be considered relevant to the exercise of the Court's discretion, or to doubt that there has been full and fair disclosure of all information material to the decision whether to approve the scheme. There is no element of oppression to minority shareholders in the scheme and there is no other aspect as to which the scheme might offend public policy, or adversely affect the interests of other groups who are not parties to the scheme.
The definition of "Excluded Shareholders" in the orders to be made by the Court will be amended to refer to the only Excluded Shareholder, Coca-Cola Holdings (Overseas) Ltd, adopting the approach described by Barrett J in Re Prime Infrastructure Holdings Ltd [2010] NSWSC 1337 at [6]-[7]. There is no utility in having this Court order annexed to Amatil's constitution, where that order does not effect any change to the constitution and Amatil should be exempted from compliance with s 411(11) in this situation: Re Anaconda Nickel Holdings Pty Ltd (2003) 44 ACSR 229; [2003] WASC 19 at [65]; Re Equinox Resources Ltd (2004) 49 ACSR 692; [2003] WASC 143.

At a glance

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